"ESG" is like "BLM" in that most all of us agree with the ideas those words represent.
Of course, as organizations see the public associates value w/ those terms they co-opt them and slap them as a label on whatever product they want you to buy. Then all they have to do is some hand waving to convince you their product is associated and furthers the goals of the ideals we recognize in the terms.
The best part of this is that it finally and officially invalidates ESG as a useful metric. It's always been political, and now they can't pretend otherwise.
>“For any element of an ESG score, whether it’s the E, S, or G, disclosure is hugely important,” Ray McConville, an S&P spokesman, told Barron’s via email. “If there isn’t a lot of information available, whether its publicly available information or information provided in our Corporate Sustainability Assessment survey, then that would negatively impact a score. So in the case of Tesla and others, the issue is partly a lack of disclosure.”
>One thing that might help Tesla is public relations. Tesla doesn’t have an active PR effort.
This just demonstrates how silly ESG really is. Could really care less if a company has an active PR effort. Who even says that's a good thing? Can't count the number of tone deaf press releases that just make the company look stupid.
Tesla's lack of a "low carbon strategy and codes of business conduct" together with "claims of racial discrimination and poor working conditions at Tesla’s Fremont factory, as well as its handling of the NHTSA investigation after multiple deaths and injuries were linked to its autopilot vehicles" lowered its score.
> poor working conditions at Tesla’s Fremont factory
Ah yes, but I bet the working conditions for the children in sweatshops making Nike's shoes have excellent working conditions! Or Apple it's well known that the people assembling the iPhones are so happy with their treatment they had to install "Happiness Nets" to catch workers as they leap from joy off the rooftops!
These index tells you only that the company was willing to jump through a bunch of hoops to get approved. It's like "Top 100 employers" lists in various countries. It reminds me of the "Tethics" from the Silicon Valley show. Big companies will just get someone to write some non-binding stuff to get added.
Part of ESG is Governance. No matter what else you might say about Tesla, it's governance is "The CEO does whatever with no controls". That can be great if you think Musk should have that much power, or horrible if you don't. Every dictator had people who thought his autocratic rule was superior to democracy - and I'm sure for some individual dictators it is. But it's a shitty system once you remove the specific people.
>makes it very clear that this is political backlash in response to Musk going "off message".
The G stands for governance, including: "Governance deals with a company’s leadership, executive pay, audits, internal controls, and shareholder rights"[0].
Ugh, please. There is no consistency in applying the standards that they themselves made up, which should tell you right away what a scam this is. Now they've weaponized it.
The people pushing "ESG" anything only care about marketing some product to the virtue signalers.
I bet most people who buy this index see "ESG", pat themselves on the back and never even look at the component companies. Check it our for yourself: [0]
Apple, Exxon, JPMorgan in the top 10. Still think this is legit?
I think that sounds like an extraordinarily broad set of criteria, which would make it very easy for ESG index providers to put their thumbs on the scale if they wanted to. In particular it seems impossible to numerically quantify the quality of Tesla's governance vs. that of Ford or General Motors, as S&P is claiming to do here.
Like most things in the real world, there is no smoking gun. It isn't cut and dry. You've got to look at the facts and context and make some judgement call.
I don't think it is TOO cynical to assume that often people do things based on some hidden motivation vs. their publicly stated reason.
Weigh my opinion however you'd like but the conclusion I made seems to fit quite well.
such fantasy bullshit. the "G" in ESG tells you all you need to know. Tesla falls short of governance guidelines which big investors really do care about. A poorly governed company presents investors with more risk and often-times less return than a properly governed one. Bundling the E the S and the G together I think is misguided, but there are lots of services that score companies on the component metrics separately. just look at the Fidelity site / app, they do a very good job of that.
What message and what script? The whole purpose of the index is to make money. The movement and everyone in the movement gets paid $$$ if when you plot the ESG index and broad equities the ESG line comes out on top.
Tesla is on rocky footing, imo. I own a Tesla, and have for 8 years, but I'm not convinced I'd buy another.
They build low quality cars that have high range and a pretty good charging network.
They have a self driving program that's basically going to kill people constantly.
Elon Musk is increasingly unhinged and unpredictable.
They were so close to being an amazing company. They nailed the direct to consumer sales piece, and the long range EV piece.
But culturally, it sounds like they are a nightmare to work for, and they are rapidly losing the lead they built themselves.
I don't want them to fail, I think there is still potential there, but watching Elon absolutely lose his mind that this is some sort of conspiracy makes it really hard for me to want them to succeed.
My car has had constant build quality issues. Yes, a demo drive is nice, but then you live with one.
We had to have our windshield replaced immediately because it didn't seal, then the automatic wipers stopped working. The door handles have been replaced at least four times. I've been locked in and out of the car because the handles wouldn't work. The software is full of memory leaks and crashes three dashboard and center console to black while driving. The threads and materials inside were pelt trimmed and didn't fit neatly. The front axle has needed to have shims replaced because turning the steering wheel was making loud popping noises... twice.
I've had superchargers not work, leaving me stranded.
I've been sent two recall notices (for different issues) that said, "sit tight, we'll contact you when parts arrive" but then they never contacted me. When I called to inquire, they said they'd have to charge me for a service visit, and it would be $200, and maybe I just didn't want to fix the issue?
I've had other recalls that did get fixed, at least.
My experience is hardly unique. The car is shoddily put together. And every service tech I've chatted with has said, "Full disclosure? They are running too lean in the factory, so some units just don't get finished right."
And that's to say nothing about the other issues people experience, like autopilot making bad decisions, or Tesla shipping their cars with demo chips, or dangerously bad welding.
He's said build quality. Which is true. Ask anyone who works at a Tesla service shop.
Panels are often misaligned. Leaks appear in the trunk spaces during rain. Software is often buggy leading to be unable to use A/C or other basic features. The list goes on. These aren't small quantities of cars almost all of them have to be serviced within a year unless the owner doesn't care.
And Elon Musk continually finds reasons to sell Tesla stock - most recently $10B that was going to be for buying Twitter, but maybe that now won't happen. It is quite likely that he will not put that money back into Tesla if Twitter acquisition doesn't happen.
Who cares? Nobody invests in tesla or index funds because of "ESG" scores. Nobody cares about the ESG index. Other than useless privileged people with too much time on their hands. If TSLA was removed from the SP500, that's news. Being removed from SP500 ESG isn't noteworthy in the slightest.
Could it be more about large institutional investors using ESG indexes in their products? Like BlackRock's ESG push [0]. Maybe I'm misinterpreting the value of the index for institutional investors, but I could see companies like Tesla disappointed that large funds might avoid investing in them based on listings like these.
Technically no, you are correct. But realistically, one can totally reasonably try to make a claim that Elon was a founding member. The company was created in June 2003, and in February 2004 Elon already became the largest shareholder (which is just slightly over half a year later after the company was founded). And that's 5 years before they produced their first ever car (the original Roadster) and 7 years before their first mass produced car (Model S).
Though I am skeptical of the sourcing on that quote, given that Elon isn't listed as a founder neither on the official "origin story" page of Tesla nor in the wikipedia entry for the company.
Correct. His first involvement was as an investor in their series A. He does, however, say[1] he's a co-founder, so I guess the quote is technically accurate.
"parrot these ideas and we'll send investors your way who are expressly investing in your not because you're making a profit, but because you're saying the right things."
nah, it legalized using client funds for the purpose of backing your political allies over profits.
If you want to invest into a company you like go ahead, but fund managers and other fiduciaries should be required to prioritize profits for their clients over ESG goals.
None of this is good for anyone except companies burning money but who can point to the DIE programs.
> but fund managers and other fiduciaries should be required to prioritize profits for their clients over ESG goals.
But they are prioritizing profits. Companies which think they can ignore societal pressures get attacked by governemnts and attorney generals way more often, that's because politicians want to show their voters that they are out to enforce the societal pressures they care about.
If all surveys show that climate change and societal equality are high on citizens priorities, then politicians and attorney generals who live and die due to such surveys will sniff non-compliance and attack the companies which are non-compliant, thus jeopardizing their profits.
If companies want to run from ESG ratings they should stay private. You have private companies which sell 300bn worth of products and services per year so it can be done.
People can invest in them indirectly via buying stocks/bonds of banks which loan them money
>If all surveys show that climate change and societal equality are high on citizens priorities, then politicians and attorney generals who live and die due to such surveys will sniff non-compliance and attack the companies which are non-compliant, thus jeopardizing their profits.
which is why Tesla was delisted from the ESG index, but amazon who drives individual items often imported from china to people's houses and operates warehouses where people have injury rates and earn low wages, and exxon mobile who creates petrol products, etc are on it.
It's all just political games in trying to coerce companies to repeat political messaging in the hope of investment money. It's not a question of "running from ESG products" its about communicating to the general public what's actually going on.
With regards to "E" doesn't really matter if the CEO says that the company "is doing more for the environment than any other company ever" , people making such scores are paid to completely sidestep this sort of socio-political talk and just look at factories, their impact on the environent, plans to reduce waste, recycling etc.
An other thing that's important is a comprehensive plan which is put on paper and can be referred to in the future to evaluate if the company kept its promises or is lagging behind. Yeah...
These people at S&P, Moody, Fitch they are essentially faceless individuals who look at spreadsheets and numbers, he won't be able to pressure them into compliance like he does with people on twitter. Mostly because they aren't on twitter, don't care about politics, don't care about him, basically don't even care about ESG and just want to be paid as the number crunchers they are. In one word they are Musk' nemesis: a non-ideology driven number cruncher.
> These people at S&P, Moody, Fitch they are essentially faceless individuals who look at spreadsheets and numbers, he won't be able to pressure them into compliance like he does with people on twitter.
In some regards this is good, but my gut says this will generally benefit the companies that know how to play the game and manipulate / move just the right numbers to limit costs, but still end up on these lists.
Oil companies rank high on ESG metrics because they don't actually burn the petroleum oil that they extract. It's that simple. Maybe politics got people confused but it's the reality of facts. If you remove the politics from the equation as S&P, Moody, Fitch are required to do, then there is not much to discuss. It's simple physics.
If the oil is easily accessible such as the oil extracted by Aramco in Saudi Arabia or Bahrain (where you have to essentially just stick a straw in the sand and oil comes out), it's no wonder that the amount of emission to complete the process is far less than an energy intensive operation such as manufacturing an electric tank such as the Cyphertruck or to a lesser extent the Model Y.
> Oil companies rank high on ESG metrics because they don't actually burn the petroleum oil that they extract.
Seems to just make ESG look ridiculous.
Drug cartels rank high on my "Community Benefit Metric" because they provide jobs for the community and only do what they must to manufacture and sell drugs /s
Who decided that oil should be accounted for when it's burned and not when it's extracted? That is a choice, and it is a choice that benefit some people over others, and it's not a choice that most people would agree with.
Because oil in a supertanker or a underground tank doesn't harm the environment. It's when oil is burned to produce energy + heat + quality of life + CO2 that the harm happens, in the form of the aforementioned CO2
There is nothing to agree or disagree... it's simple physics. If we want to politicize physics then we can go forward and politicize physics too. But at least we should be conscious about it.
So do we think ESG scores get transitively priced in, the way carbon pricing should work?
Like, if you make it harder for those who burn oil to raise capital, does that mean that there are fewer customers for the people who extract it? Does it hurt their profits?
Is this all passed on, magically, by the Efficient Market?
1) So news dropped today which was a big red day across the board to begin with. So if we want to quantify let's ballpark the ESG drop news in a -1B marketcap? I remind you Tesla is (amazingly) a 750B company. If they think that a -1B on hugely red day can make it harder for them to raise capital, then they are better off closing shop on all their Gigafactories because evidently there is no point in continuing the enterprise
2) Yes, it's exactly like that, punishing those who burn oil hurts those who mine oil, if it doesn't it only means that those who burn oil found a way to hide from ESG rating by becoming a private company and getting financed elsewhere eg. via private equity or using old fashioned bank loans and credit lines, or even by convincing clients to pay in advance or with less delay.
Actions and desires have consequences, the passion that people have for climate change has consequences, when you wanna get to zero you don't get to skip anything and even companies which people are emotionally attached to (such as Tesla) have to comply.
Source: https://www.spglobal.com/spdji/en/documents/indexnews/announ...